Commercial Law, 2011 Bar — Question 16

MULTIPLE CHOICE

P sold to M 10 grams of shabu worth Php5,000.00. As he had no money at the time of the sale, M wrote a promissory note promising to pay P or his order Php5,000. P then indorsed the note to X (who did not know about the shabu), and X to Y. Unable to collect from P, Y then sued X on the note. X set up the defense of illegality of consideration. Is he correct? A) No, since X, being a subsequent indorser, warrants that the note is valid and subsisting. B) No, since X, a general indorser, warrants that the note is valid and subsisting. C) Yes, since a void contract does not give rise to any right. D) Yes, since the note was born of an illegal consideration which is a real defense.

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